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(Solution) Finance and Funding in Travel and Tourism Sector

Added on - 08 Dec 2020

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FINANCE AND FUNDINGINTRAVEL AND TOURISMSECTOR
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1A. Explaining the concept of CVP analysis with its importance in financialmanagement of tourism sector..........................................................................................1B. Analysing the pricing method for EUROCARIB to determine the price to chargefrom tourists..........................................................................................................................2C. Analysing factors which influences the profit of EUROCARIB from the holiday trip.................................................................................................................................................3D1. Evaluating the viability of EUROCARIB' trip with justification...............................4TASK 2............................................................................................................................................4A. Explaining different management accounting information used in EUROCARIB.4B. Assessing the use of investment appraisal techniques as decision making tools forEUROCARIB........................................................................................................................5TASK 3............................................................................................................................................8A. Interpretation of financial statements using ratio analysis.......................................8TASK 4..........................................................................................................................................11A. Analysing different external and internal source of funding for starting a newproject..................................................................................................................................11CONCLUSION.............................................................................................................................12REFERENCES............................................................................................................................13
INTRODUCTIONTourism is one of the biggest and fastest growing industry in UK. The reportincludes a critical discussion of finance and funding in tourism sector. Tourism is animportant source for a countries economy. In the recent times, several inbound andoutbound visitors prefer to visit London. Thus, for grabbing opportunities and attainingsuccess business units need to lay emphasis on strategic financial management. Thereport is about EUROCARIB TOURS, a major European tour operator. The reportdiscusses, cost-volume-profit analysis and its importance in financial management intourism sector. Further, it highlights different pricing strategy that EUROCARIB can use.The factors which can affect the profit is also presented in this report. Further, differenttypes of management accounting information are explained in study. Differentinvestment appraisal techniques are used which helps in making decisions arementioned with a calculative example. The file discussed the various ratio analysis forprofitability on the financial statements of EUROCARIB. The report will also havediscussed different type of external and internal source of financing for new hotel inCaribbean.TASK 1A. Explaining the concept of CVP analysis with its importance in financial managementof tourism sector.Cost Volume Profit analysis is an important tool for financial managers to controlfinancial activities in business. It helps in studying the relationship between volume,cost, price, profit which can be incurred from a particular activity (Ismail andLouderback, 2018). CVP analysis plays an important role in profit planning process andhelps in evaluating the purpose of budgets and forecast. The three elements of CVPanalysis which helps in financial decision-making process of EUROCARIB are:Cost:The computation and allocation of cost helps in ascertaining the actualprofit of EUROCARIB. The cost of a company can be classified as direct costand indirect costs.1
Direct cost:It is the expenditure which incurred in producing goods or services.Direct cost are variable expenses like raw material, labour cost and direct expenses.These costs are primary and is important for company.Indirect cost:it is the cost which incurred in daily business operations. They arerelated to sales of a products. Indirect costs are of two type fixed and variable costs.Fixed cost will stay stable with the change in any volume of activity. Whereas, variableexpenses will vary with alter in level of activities.Volume: The type of cost incurred will directly affect volume of activities inbusiness. Price of product will be based on cost of production. Regardless of thevolume of tourist fixed cost needs to be covered (Braun, 2017). The number ofpackages prepared and sold by rivals will determine price of a package to meetbreak-even point.Profit: Break even analysis will help in ascertaining the revenue, high volume ofsales with low cost results in getting desired profit margin.CVP analysis will help financial manager of EUROCARIB to compute the effect ofchanges in price, direct-indirect cost, and volume on profit of a trip. It provides aminimum sales volume required to cover the fixed cost and to avoid any losses. It alsohelps to evaluate whether the travel package is profitable or not. CVP analysis isessential for budgeting and profit planning process.B. Analysing the pricing method for EUROCARIB to determine the price to charge fromtourists.Pricing strategy has a drastic impact on the profit margin of business and helps indetermining the steps at which EUROCARIB can grow (Nagle and Müller, 2017). It’svery important to choose the best pricing strategy or method for package ofEUROCARIB. The pricing method which can be adopted are as follows:Competitive or Marketing pricing:Competition based marketing pricesfocuseson setting up of price of product based on the competitor's packageprice. It is important to have an idea about what the current trend in market is.With the increasing trend in tourism, tourists start comparing packages prices2
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